More good news from last week’s McKinsey’s report

by / Sunday, 22 July 2012 / Published in Smartgrid-CI Blog

Last week, our subscribers had the opportunity to learn about consulting firm McKinsey’s forecast for car battery technology in the next decade. The firm disaggregated the 40 elements that make a battery, analyzed the technical trend for each of them and came out with a verdict; a “should be cost model” that tells us that: “ the cost of a complete automotive lithium-ion battery pack could fall from $500 to $600 per kilowatt hour (kWh) today to about $200 per kWh by 2020 and to about $160 per kWh by 2025”. 

The direct consequence of this trend is that: “automakers that acquire batteries at prices below $250 per kWh could offer electrified vehicles competitively, on a total-cost-of-ownership basis, with vehicles powered by advanced internal-combustion engines”, if, of course, “gasoline prices at or above $3.50 a gallon”.
Most comments focused on this finding but McKinsey’s report offers more interesting learning.
One of them is that: “Technical advances in cathodes, anodes, and electrolytes could increase the capacity of batteries by 80 to 110 percent by 2020–25”. 
This is considerable enough to hypothesize that: “Other sectors could face disruptions as well—particularly electric power and petroleum, where the emergence of inexpensive energy storage could undermine the profitability of capital-intensive, long-lived assets. Power companies, for instance, could face challenges if low-cost battery storage enables the wider use of distributed generation or if the adoption of electrified-vehicle charging alters patterns of demand in some markets”.
In other words, lower battery cost along with longer autonomy could give micro-grids a boost with all the consequences this could have for established energy business models.
According to the report, the same radical consequences are to be expected for the oil industry. McKinsey’s recommendation is that “executives should be considering bold actions to capitalize on one of the biggest disruptions facing the transportation, power, and petroleum sectors over the next decade or more.”
Better safe than sorry.
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